Teledyne Technologies Reports Fourth Quarter Results

  Teledyne Technologies Reports Fourth Quarter Results

Business Wire

THOUSAND OAKS, Calif. -- January 23, 2014

Teledyne Technologies Incorporated (NYSE:TDY):

  *Record fourth quarter sales of $596.6 million increased 5.1% compared to
    last year
  *All-time record quarterly GAAP earnings per share from continuing
    operations of $1.44
  *Record full-year sales and GAAP earnings per share from continuing
    operations of $2,338.6 million and $4.87, respectively
  *Fourth quarter 2013 includes pretax charges of $5.3 million for severance
    and facility consolidations, offset by net discrete tax benefits of $6.1
    million
  *Acquired C.D. Limited (“CDL”), a supplier of subsea inertial navigation
    systems and motion sensors

Teledyne today reported fourth quarter 2013 sales of $596.6 million, compared
with sales of $567.4 million for the fourth quarter of 2012, an increase of
5.1%. Net income from continuing operations was $54.9 million ($1.44 per
diluted share) for the fourth quarter of 2013, compared with net income from
continuing operations of $43.9 million ($1.17 per diluted share) for the
fourth quarter of 2012,  an increase of 25.1%. Net income attributable to
Teledyne, including discontinued operations, was $54.9 million ($1.44 per
diluted share) for the fourth quarter of 2013, compared with $46.2 million
($1.23 per diluted share) for the fourth quarter of 2012, an increase of
18.8%.

“We ended 2013 with record quarterly GAAP earnings and achieved our twelfth
consecutive year of earnings growth,” said Robert Mehrabian, chairman,
president and chief executive officer. “The strength of our high technology
industrial businesses continued to propel our growth. In the fourth quarter,
our instrumentation segment had record quarterly sales, with organic growth in
each product category, and for the full year, instrumentation sales exceeded
$1.0 billion. In the marine instrumentation domain, we acquired CDL, further
enhancing our product portfolio in the offshore oil & gas market. Our
commercial aerospace business also performed extremely well all year,
developing new products and gaining share in this growing market. For example,
during the quarter we announced a landmark single source contract under which
we will supply unique aircraft information management solutions for the
majority of future Boeing commercial aircraft. Throughout 2013, we also
undertook aggressive actions to consolidate our businesses and lower our cost
structure. We enter 2014 with a demonstrated record of performance, a more
efficient and more attractive business portfolio, and a strong balance sheet.”

The fourth quarter of 2013 reflected pretax charges totaling $5.3 million for
severance and facility consolidation expenses. The charges were comprised of
$3.2 million in severance related costs and $2.1 million in facility closure
and relocation costs. The fourth quarter of 2012, reflected pretax charges
totaling $1.7 million for severance and facility consolidation costs. The
fourth quarter of 2013 also reflected net discrete tax benefits totaling $6.1
million. The tax benefits for the fourth quarter of 2013 are primarily due to
research and development credits, the remeasurement of uncertain tax positions
and statute of limitation expirations. The fourth quarter of 2012 also
reflected net discrete tax benefits totaling $1.1 million. The tax benefits
for the fourth quarter of 2012 are primarily due to expirations of the statute
of limitations.

Full Year 2013

Total year sales for 2013 were $2,338.6 million, compared with $2,127.3
million for 2012,  an increase of 9.9%. Net income from continuing operations
was $185.0 million ($4.87 per diluted share) for 2013, compared with net
income from continuing operations of $161.8 million ($4.33 per diluted share)
for 2012,  an increase of 14.3%. Net income for 2013 and 2012 also included
net tax credits of $21.3 million and $5.4 million, respectively. Net income
attributable to Teledyne, including discontinued operations, was $185.0
million ($4.87 per diluted share) for 2013 compared with $164.1 million ($4.39
per diluted share) for 2012.

Review of Operations (Comparisons are with the fourth quarter of 2012, unless
noted otherwise.)

Instrumentation

The Instrumentation segment’s fourth quarter 2013 sales were $275.8 million,
compared with $243.6 million, an increase of 13.2%. Fourth quarter 2013
operating profit was $44.4 million, compared with $47.9 million, a decrease of
7.3%.

The fourth quarter 2013 sales increase primarily resulted from higher sales of
both marine and environmental instrumentation. The higher sales of $21.5
million for marine instrumentation reflected increased sales of marine
acoustic sensors and systems, as well as interconnect systems used in offshore
energy production, and also included a total of $18.1 million in incremental
revenue from recent acquisitions including the March 2013 acquisition of RESON
A/S (“RESON”) and the acquisition of C.D. Limited on October 22, 2013. Sales
for environmental instrumentation increased $8.6 million and included $7.3
million in sales from the August 2013 acquisition of assets of CETAC
Technologies (“CETAC”). Sales of electronic test and measurement
instrumentation increased $2.1 million. The decrease in operating profit
reflected $1.0 million in increased intangible asset amortization and $1.2
million in severance and facility consolidation expenses, partially offset by
the impact of higher sales.

Digital Imaging

The Digital Imaging segment’s fourth quarter 2013 sales were $102.9 million,
compared with $102.7 million, an increase of 0.2%. Operating profit was $3.6
million for the fourth quarter of 2013, compared with $5.4 million, a decrease
of 33.3%.

The 2013 sales increase primarily reflected significantly increased sales of
sensors and cameras for commercial machine vision and life sciences
applications, mostly offset by lower sales of infrared imaging and LIDAR
systems primarily for government applications. Operating profit in 2013
reflected $1.6 million in severance and related expenses and a $1.2 million
asset impairment charge, partially offset by favorable product mix
differences.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s fourth quarter 2013 sales were
$149.4 million, compared with $151.8 million, a decrease of 1.6%. Operating
profit was $15.6 million for the fourth quarter of 2013, compared with $17.6
million, a decrease of 11.4%.

The sales decrease reflected lower sales of $4.9 million from electronic
manufacturing services products and lower sales of $4.0 million from microwave
and interconnect systems. The lower sales were partially offset by increased
sales of $6.5 million from avionics products and electronic relays. Operating
profit in 2013 reflected $3.5 million for severance and facility consolidation
costs associated with certain defense electronics businesses, while operating
profit in 2012 included $1.7 million in similar costs. Operating profit in the
fourth quarter of 2013 also reflected $1.8 million in higher net pension
expense.

Engineered Systems

The Engineered Systems segment’s fourth quarter 2013 sales were $68.5 million
compared with $69.3 million, a decrease of 1.2%. Operating profit was $7.2
million for the fourth quarter of 2013, compared with $6.6 million, an
increase of 9.1%.

The fourth quarter 2013 sales decrease reflected lower sales of engineered
products and services of $1.7 million and a slight decrease in sales of
turbine engines, partially offset by higher energy systems sales of $1.4
million. Operating profit in the fourth quarter of 2013 primarily reflected
favorable product mix differences, partially offset by the impact of lower
sales and $0.6 million in higher net pension expense.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $98.5 million for the fourth quarter
of 2013, compared with $121.9 million. The lower cash provided by operating
activities in the fourth quarter of 2013 reflected severance and legal
settlement payments in the fourth quarter of 2013. Free cash flow (cash
provided by operating activities less capital expenditures) was $79.9 million
for the fourth quarter of 2013, compared with $99.6 million and reflected
lower cash provided by operating activities. At December 29, 2013, total debt
was $552.4 million, which included $74.1 million drawn on the $750.0 million
credit facility, $250.0 million in senior notes, $200.0 million in term loans,
$16.0 million in other debt and $12.3 million in capital lease obligations.
Cash and cash equivalents were $66.0 million at December 29, 2013. The company
received $2.1 million from the exercise of stock options in the fourth quarter
of 2013, compared with $7.7 million. Capital expenditures for the fourth
quarter of 2013 were $18.6 million, compared with $22.3 million. Depreciation
and amortization expense for the fourth quarter of 2013 was $24.0 million,
compared with $21.9 million.

In October 2013, a subsidiary of Teledyne acquired C.D. Limited for $22.2
million. The acquisition was funded from borrowings under the credit facility
and cash on hand. In 2014, the company may use funds to repurchase stock under
its stock repurchase program authorized in October 2011.

                                                 
Free Cash              Fourth Quarter                     Total Year
Flow(a)
(in millions,
brackets               2013         2012              2013          2012
indicate use
of funds)
Cash provided
by operating           $ 98.5           $ 121.9           $ 204.1           $ 189.5
activities
Capital
expenditures
for property,          (18.6  )         (22.3   )         (72.6   )         (65.3   )
plant and
equipment
Free cash flow         79.9             99.6              131.5             124.2
Pension
contributions,         —               —                51.4             60.3    
net of tax (b)
Adjusted free          $ 79.9          $ 99.6           $ 182.9          $ 184.5 
cash flow
(a) The company defines free cash flow as cash provided by operating activities (a
measure prescribed by generally accepted accounting principles) less capital
expenditures for property, plant and equipment. Adjusted free cash flow eliminates
the impact of pension contributions on a net of tax basis. The company believes that
this supplemental non-GAAP information is useful to assist management and the
investment community in analyzing the company’s ability to generate cash flow,
including the impact of voluntary and required pension contributions.
(b) The domestic pension cash contributions were voluntary.


Pension

Pension expense was $4.5 million for the fourth quarter of 2013 compared with
$1.6 million. The increase in pension expense primarily reflected the impact
of using a 4.4% discount rate to determine the benefit obligation for the
domestic plan in 2013 compared with a 5.5% discount rate used in 2012. Pension
expense allocated to contracts pursuant to U.S. Government Cost Accounting
Standards (“CAS”) was $3.7 million for the fourth quarters of both 2013 and
2012. Pension expense determined allowable under CAS can generally be
recovered through the pricing of products and services sold to the U.S.
Government.

Income Taxes

The effective tax rate for the fourth quarter of 2013 was 14.9% compared with
29.4%. The decrease primarily reflected $6.1 million in net tax benefits for
discrete items in the fourth quarter of 2013. The fourth quarter of 2012
reflected $1.1 million in net tax benefits for discrete items. Excluding the
net tax benefits in both periods, the effective tax rates would have been
24.4% for the fourth quarter of 2013 and 31.1% for the fourth quarter of 2012.
The lower 2013 tax rate, excluding the net discrete tax benefits in both
quarters, primarily reflected a change in the proportion of domestic and
foreign income, a lower state effective tax rate and increased federal tax
credits for research and development.

Stock Option Compensation Expense

For the fourth quarter of 2013, the company recorded a total of $3.1 million
in stock option expense, of which $2.2 million was recorded in the operating
segment results and $0.9 million was recorded as corporate expense. For the
fourth quarter of 2012, the company recorded a total of $2.1 million in stock
option expense, of which $1.5 million was recorded in the operating segment
results and $0.6 million was recorded as corporate expense.

Other

Interest expense, net of interest income, was $4.8 million for the fourth
quarter of 2013, compared with $5.2 million, and reflected lower average
interest rates and lower debt levels. Corporate expense was $7.3 million for
the fourth quarter of 2013, compared with $9.9 million and primarily reflected
lower compensation expense as well as lower professional fees expense. Other
income and expense was income of $5.3 million for the fourth quarter of 2013,
compared with income of $0.7 million. The 2013 amount included $3.6 million
from the reversal of reserves no longer needed in connection with a legal
settlement. The fourth quarter of 2012 includes income of $2.3 million from
discontinued operations related to the finalization of income tax benefits on
the April 2011 sale of the piston engines businesses.

Outlook

Based on its current outlook, the company’s management believes that first
quarter 2014 earnings per diluted share will be in the range of approximately
$1.08 to $1.14 and the full year 2014 earnings per diluted share outlook is
expected to be in the range of approximately $5.06 to $5.12. The company’s
effective tax rate for 2014 is expected to be 30.0%, before discrete items.
For the company's domestic pension plan, the discount rate for 2014 will
increase to 5.4% from 4.4%.

Forward-Looking Statements Cautionary Notice

This press release contains forward-looking statements, as defined in the
Private Securities Litigation Reform Act of 1995, relating to earnings, growth
opportunities, product sales, capital expenditures, pension matters, stock
option compensation expense, stock repurchases, interest expense, severance,
facility consolidation and environmental remediation costs, taxes, and
strategic plans. Forward-looking statements are generally accompanied by words
such as “estimate,” “project,” “predict,” “believes,” or “expect,” that convey
the uncertainty of future events or outcomes. All statements made in this
press release that are not historical in nature should be considered
forward-looking.

Actual results could differ materially from these forward-looking statements.
Many factors could change the anticipated results, including: disruptions in
the global economy; changes in demand for products sold to the defense
electronics, instrumentation, digital imaging, energy exploration and
production, commercial aviation, semiconductor and communications markets;
funding, continuation and award of government programs; and cuts to defense
spending resulting from future deficit reduction measures, including potential
automatic cuts to defense spending that have been triggered by the Budget
Control Act of 2011. Increasing fuel costs could negatively affect the markets
of our commercial aviation businesses. Lower oil and natural gas prices, as
well as instability in the Middle East or other oil producing regions, and new
regulations or restrictions relating to energy production, including with
respect to hydraulic fracturing, could negatively affect the company’s
businesses that supply the oil and gas industry. In addition, financial market
fluctuations affect the value of the company’s pension assets.

Changes in the policies of U.S. and foreign governments could result, over
time, in reductions and realignment in defense or other government spending
and further changes in programs in which the company participates.

While the company’s growth strategy includes possible acquisitions, we cannot
provide any assurance as to when, if or on what terms any acquisitions will be
made. Acquisitions involve various inherent risks, such as, among others, our
ability to integrate acquired businesses, retain customers and achieve
identified financial and operating synergies. There are additional risks
associated with acquiring, owning and operating businesses internationally,
including those arising from U.S. and foreign policy changes and exchange rate
fluctuations.

While the company believes its internal and disclosure control systems are
effective, there are inherent limitations in all control systems, and
misstatements due to error or fraud may occur and may not be detected.

Readers are urged to read the company’s periodic reports filed with the
Securities and Exchange Commission (“SEC”) for a more complete description of
the company, its businesses, its strategies and the various risks that the
company faces. Various risks are identified in Teledyne’s 2012 Annual Report
on Form 10-K and subsequent Quarterly Reports on Form 10-Q. The company
assumes no duty to publicly update or revise any forward-looking statements,
whether as a result of new information or otherwise.

A live webcast of Teledyne’s fourth quarter earnings conference call will be
held at 11:00 a.m. (Eastern) on Thursday, January 23, 2014. To access the
call, go to www.teledyne.com approximately ten minutes before the scheduled
start time. A replay will also be available for one month starting at 12:00
p.m. (Eastern) on Thursday, January 23, 2014.


TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FOURTH QUARTER AND TWELVE MONTHS ENDED
DECEMBER 29, 2013 AND DECEMBER 30, 2012
(Unaudited - in millions, except per share amounts)

                  Fourth       Fourth       Twelve         Twelve
                     Quarter         Quarter         Months            Months
                     2013            2012            2013              2012
Net sales            $ 596.6         $ 567.4         $ 2,338.6         $ 2,127.3
Costs and
expenses:
Costs of sales       382.0           359.0           1,500.0           1,379.1
Selling,
general and          151.1          140.8          598.3            505.1     
administrative
expenses
Total costs          533.1          499.8          2,098.3          1,884.2   
and expenses
Income before
other income         63.5            67.6            240.3             243.1
and income
taxes
Other income,        5.3             0.7             4.1               2.9
net
Interest and
debt expense,        (4.8    )       (5.2    )       (20.4     )       (17.8     )
net
Income from
continuing
operations           64.0            63.1            224.0             228.2
before income
taxes
Provision for        9.5            18.6           39.5             65.4      
income taxes
Income from
continuing
operations           54.5            44.5            184.5             162.8
including
noncontrolling
interest
Discontinued         —              2.3            —                2.3       
operations
Net income           54.5            46.8            184.5             165.1
Noncontrolling       0.4            (0.6    )       0.5              (1.0      )
interest
Net income
attributable         $ 54.9         $ 46.2         $ 185.0          $ 164.1   
to Teledyne
Continuing           $ 1.44          $ 1.17          $ 4.87            $ 4.33
operations (a)
Discontinued         —              0.06           —                0.06      
operations
Diluted
earnings per         $ 1.44         $ 1.23         $ 4.87           4.39      
common share
Weighted
average
diluted common       38.2           37.6           38.0             37.4      
shares
outstanding
(a) Excluding noncontrolling interest



TELEDYNE TECHNOLOGIES INCORPORATED
SUMMARY OF SEGMENT NET SALES AND OPERATING PROFIT (a)
FOR THE FOURTH QUARTER AND TWELVE MONTHS ENDED
DECEMBER 29, 2013 AND DECEMBER 30, 2012
(Unaudited - in millions)

                      Fourth          Fourth                             Twelve            Twelve
                                             %                                            %
                      Quarter         Quarter         Change             Months            Months            Change
                      2013            2012                              2013              2012                     
Net sales:
Instrumentation       $ 275.8         $ 243.6         13.2    %         $ 1,022.8         $ 804.7           27.1    %
Digital Imaging       102.9           102.7           0.2     %         414.8             415.9             (0.3   ) %
Aerospace and
Defense               149.4           151.8           (1.6   ) %         625.1             605.3             3.3     %
Electronics
Engineered            68.5           69.3           (1.2   ) %         275.9            301.4            (8.5   ) %
Systems
Total net sales       $ 596.6        $ 567.4        5.1     %         $ 2,338.6        $ 2,127.3        9.9     %
Operating
profit and
other segment
income:
Instrumentation       $ 44.4          $ 47.9          (7.3   ) %         $ 162.0           $ 146.0           11.0    %
Digital Imaging       3.6             5.4             (33.3  ) %         28.2              24.8              13.7    %
Aerospace and
Defense               15.6            17.6            (11.4  ) %         65.7              80.5              (18.4  ) %
Electronics
Engineered            7.2            6.6            9.1     %         22.0             28.5             (22.8  ) %
Systems
Segment
operating
profit and            70.8            77.5            (8.6   ) %         277.9             279.8             (0.7   ) %
other segment
income
Corporate             (7.3    )       (9.9    )       (26.3  ) %         (37.6     )       (36.7     )       2.5     %
expense
Other income,         5.3             0.7             *                  4.1               2.9               41.4    %
net
Interest and
debt expense,         (4.8    )       (5.2    )       (7.7   ) %         (20.4     )       (17.8     )       14.6    %
net
Income from
continuing
operations            64.0            63.1            1.4     %         224.0             228.2             (1.8   ) %
before income
taxes
Provision for         9.5            18.6           (48.9  ) %         39.5             65.4             (39.6  ) %
income taxes
Income from
continuing
operations
including             54.5            44.5            22.5    %         184.5             162.8             13.3    %

noncontrolling
interest
Discontinued          —              2.3            *                  —                2.3              *
operations
Net income            54.5            46.8            16.5    %         184.5             165.1             11.8    %
Noncontrolling        0.4            (0.6    )       *                  0.5              (1.0      )       *
interest
Net income
attributable to       $ 54.9         $ 46.2         18.8    %         $ 185.0          $ 164.1          12.7    %
Teledyne
* not meaningful
(a) Our previously reported 2012 fiscal year segment data has been restated to reflect a revised segment reporting
structure adopted in the second quarter of 2013.



TELEDYNE TECHNOLOGIES INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Current period unaudited – in millions)

                               December 29, 2013     December 30, 2012
ASSETS
Cash and cash equivalents          $   66.0                  $     45.8
Accounts receivable, net           378.0                     350.3
Inventories, net                   294.3                     281.2
Deferred income taxes, net         31.9                      39.8
Prepaid expenses and other         28.9                     27.7
assets
Total current assets               799.1                     744.8
Property, plant and                357.7                     349.5
equipment, net
Goodwill and acquired              1,308.7                   1,255.9
intangible assets, net
Prepaid pension asset              222.0                     —
Other assets, net                  63.6                     56.2
Total assets                       $   2,751.1              $     2,406.4
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Accounts payable                   $   147.5                 $     148.6
Accrued liabilities                267.1                     256.7
Current portion of
long-term debt and capital         3.5                      2.0
leases
Total current liabilities          418.1                     407.3
Long-term debt and capital         549.0                     556.2
lease obligations
Other long-term                    265.3                    239.5
liabilities
Total liabilities                  1,232.4                   1,203.0
Total stockholders’ equity         1,518.7                  1,203.4
Total liabilities and              $   2,751.1              $     2,406.4
stockholders’ equity

Contact:

Teledyne Technologies Incorporated
Investor Contact:
Jason VanWees, 805-373-4542
or
Media Contact:
Robyn McGowan, 805-373-4540
 
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